Torrent, Dr Reddy’s, Aurobindo, Cipla, Lupin in race to buy Sagent

Valuation is expected to be upwards of $500 million (Rs 3,400 crore), for which large generic drug makers and financial investors like global private equity funds may also be interested.Vikas Dandekar | ET Bureau | January 25, 2016, 06:34 IST

The discussions started about a month ago, they told ET. Sun Pharmaceutical Industries was also interested and had even initiated the due diligence process, but then backed out, mainly over valuation, the sources said.

Sagent has mandated New Yorkbased investment banker Perella Weinberg Partners to scout for potential opportunities as part of its strategic alternatives.

Valuation is expected to be upwards of $500 million (Rs 3,400 crore), for which large generic drug makers and financial investors like global private equity funds may also be interested. Sagent didn’t respond to an email ET sent last week seeking comment. Cipla said it is constantly in discussions with multiple parties on potential collaboration opportunities in line with its aspiration to drive access and ensure availability of high quality, affordable medicines, but refused to comment on any specific talks. The other Indian firms that the sources said were in talks didn’t respond to request for comment.

Sagent presents an ideal opportunity for companies that have an injectables manufacturing platform with focus on hospital-based medicines, industry watchers said. “Sagent has a tailor-made injectable sales and distribution outfit that could suit Indian companies. But the injectable business is getting highly competitive so the margins are getting squeezed. This is the right time to exit (for current investors), as money is available and valuations will be better,” a senior executive said.

Besides, with an increasing number of Indian drug makers faced with tough regulatory actions from the US Food and Drug Administration, the executive believed, the appetite for complementary manufacturing sites and products is high among Indian companies.

Sagent’s marketed products include calcium leucovorin, gemcitabine, octreotide, zoledronic acid and oxaliplatin in the anti-cancer drugs segment. Sagent has a set of anti-infective and drugs for critical care like propofol, adenosine and heparin, where it claims leadership positions.

Sagent recently forecast sales of $325-365 million for 2016, representing a compounded annual growth rate of 14% since 2013. It expects adjusted Ebitda of $35-50 million for the year.

The company operates through a network of 46 global partners. This offers the benefits of efficient manufacturing, diversified supplies, specialised facilities, capital efficiency and a broad development platform.

Founded a decade ago, Sagent’s portfolio of 55 products addresses a $2-billion opportunity and it plans a major future scale-up. The company has a pipeline of 98 future products that to gain access in a $13 billion market for injectables, which can further expand to a $37 billion opportunity by 2020.

Last year, top Indian companies saw hectic M&A activity. In the biggest ever overseas acquisition by a pharmaceutical company, Lupin acquired US-based Gavis Pharma in an $880 million deal to shore up its products pipeline. Cipla bought Invagen for $550 million as part of its US market strategy.

For Indian drug makers, the most sought-after market is the US, where as much as 86% of the total dispensed prescriptions are for generic drugs. However, in terms of value, branded prescriptions account for roughly 70% of the total US spending on medicines, which totaled $329 billion in 2013, according IMS Health data.